Christy and Kyle took steps toward transferring the shares, including signing required documents and submitting an affidavit regarding a lost share certificate. Before the bank gave final approval or countersigned transfer documents, Christy decided not to transfer the shares to the trust. Christy did not deliver her replacement stock certificate to Inwood and asked the bank not to proceed with the transfer. The bank did not complete the transfer or countersign the necessary documents.
Kyle, as trustee and beneficiary, sued Inwood, claiming the trust agreement effected an irrevocable gift and seeking a declaration that the trust owned the shares. Kyle also alleged tortious interference by Inwood for allegedly convincing Christy to revoke the transfer. Christy intervened, asserting the shares remained her separate property.
The trial court granted summary judgment for Inwood, holding that Kyle take nothing on his claims. The court of appeals reversed as to the tortious interference claim. The Texas Supreme Court reversed the court of appeals, reinstating the trial court’s take-nothing judgment.
The court first discussed inter vivos trusts:
A party can transfer property through an inter vivos trust. One way to create an express trust is by “a property owner’s inter vivos transfer of the property to another person as trustee for the transferor or a third person.” The trustee holds legal title to the trust property, and the beneficiary holds equitable or beneficial title. We aim to “enforce the settlor’s intent as expressed in an unambiguous trust over the objections of beneficiaries that disagree with a trust’s terms.” The grantor can make the transfer of property to an inter vivos trust subject to a condition precedent that must occur before the transfer is effective.
Id. The court also discussed the law regarding gifts:
To constitute an effective inter vivos gift under the common law, we have said that “there must be a delivery of possession of the subject matter of the gift by the donor to the donee, and a purpose on the part of the donor to vest in the donee, unconditionally and immediately, the ownership of the property delivered.” The burden of proving an effective gift is on the alleged recipient. Importantly, we have said that “[a] gift cannot be made to take effect in the future.” Rather, to make a valid gift, “the donor must, at the time [she] makes it, intend an immediate divestiture of the rights of ownership out of [herself] and a consequent immediate vesting of such rights in the donee.”
The Texas Business and Commerce Code also addresses certain requirements for effecting a transfer of securities. Section 8.104(a)(1) provides that “[a] person acquires a security or an interest therein” if “the person is a purchaser to whom a security is delivered.” A “purchaser” takes by any “voluntary transaction creating an interest in property,” including by gift. A certificated security is “delivered,” effectuating a transfer, when “the purchaser acquires possession of the security certificate” or when the certificate is indorsed and delivered to a securities intermediary.
Id.
The central legal issue concerned whether a trust agreement effected a transfer of bank shares to a trust when the agreement expressly conditioned the transfer on the bank’s approval, which was never given. The court held that the trust agreement did not transfer ownership of the shares because the condition precedent (bank approval) was not satisfied. Moreover, the trust only expressed a future intent to transfer the shares, not an immediate and unconditional transfer of ownership, which is required for a valid gift under Texas law. The court found that the irrevocability clause in the trust agreement did not override the condition precedent of bank approval. The shares did not become trust property, and the grantor retained the right not to transfer the shares until all conditions were met.
The Court stated:
The KTA’s granting clause provides that Christy “hereby transfers and delivers” to the Kyle Trust “the property described in Schedule A attached hereto . . . upon the express terms and conditions . . . hereinafter set forth.” Schedule A contemplates two transfers to the Kyle Trust. First, it states that “$100.00 cash is the initial property transferred by [Christy].” Next, it provides that “[u]pon approval by [Inwood], [Christy] intends to transfer 581,658.21 Shares of [Inwood] common stock.” (Emphasis added.) The text—in particular, the different verb tenses used to describe each transfer—demonstrates that the KTA operated to immediately transfer $100 to the Kyle Trust, while the share transfer would take effect in the future, and only if approved by Inwood. Similarly, describing only the $100 as the “initial property” indicates that the $100 would be transferred first and the Inwood shares would be transferred at a later time if Inwood approved. This distinction compels the conclusion that the KTA did not effect a transfer of the Inwood shares to the Kyle Trust. In contrast to Christy’s unconditional transfer of the initial trust property of $100, the KTA unambiguously expressed Christy’s intent to condition her transfer of the Inwood shares on Inwood’s approval. Because that condition was never satisfied, the shares were never transferred to the Kyle Trust.
Nor can Kyle claim that he or the Kyle Trust acquired the Inwood shares by gift. The KTA’s plain language contemplates only a future intention to transfer the shares, not a present gift. As the share transfer was contemplated to take effect in the future and conditioned on Inwood’s approval, it lacks the “immediate[] and unconditional[]” characteristics of a valid gift.
Id.
Regarding a claim for tortious interference with contract against the bank, the court held that the claim failed as a matter of law because the claimant had no legal right under the contract with which the defendant could interfere. Since the beneficiary had no enforceable right to the shares, the tortious interference claim could not proceed.
The Texas Supreme Court reversed the appellate court’s decision allowing the tortious interference claim to proceed and reinstated the trial court’s take-nothing judgment in favor of the bank.